RBA makes emergency cash rate cut to 0.25%

author-avatar By on March 19, 2020
RBA makes emergency cash rate cut to 0.25%

Photo by camilo jimenez on Unsplash

Australia's central bank has made history today, cutting the cash rate for the second time in a month for the first time in history.

The Reserve Bank of Australia (RBA) today cut the cash rate by a further 25 basis points after already doing so at its regular meeting at the beginning of the month.

Today's cut takes the cash rate to 0.25%, and is likely to be the RBA's last cut for a long time, having recently flagged that it would not lower the cash rate below this threshold.  

Thinking about refinancing to a low-rate, variable owner-occupier home loan? The table below displays some of the lowest-rate variable home loans currently on the market for owner occupiers:

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
FixedMore details
NO UPFRONT OR ONGOING FEES

Basic Home Loan Fixed (Principal and Interest) (LVR < 70%) 3 Years

NO UPFRONT OR ONGOING FEES

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. Rates correct as of September 26, 2021. View disclaimer.

The RBA usually only meets on the first Tuesday of every month (except January), with its next regular meeting scheduled for Tuesday April 7. 

But earlier in the week, RBA Governor Philip Lowe said there would be an additional meeting to "announce further policy measures to support the Australian economy".  

This isn't the first time the RBA has made a rate cut outside of its regular meeting - it did one in July 1997, for example - but it is the first time two changes have been made in one month. 

Not even at the height of the global financial crisis (GFC) did the Reserve Bank resort to such measures.

However, the crippling effects of the coronavirus on both the domestic and global economy forced the RBA's hand to take this unprecedented measure in a bid to stabilise Australia's economy and soften some of the blows to come. 

Governor Lowe's address was very different to one he usually delivers each month. 

He admitted that the primary response to the virus is to manage the health of the population, but stated that monetary and fiscal policy play an important role in reducing the economic and financial disruption it causes. 

"At some point, the virus will be contained and the Australian economy will recover," he said. 

"In the interim, a priority for the Reserve Bank is to support jobs, incomes and businesses, so that when the health crisis recedes, the country is well placed to recover strongly."

Mr Lowe also said the board would not increase its cash rate target until full employment is reached and inflation is "sustainably" within the 2-3% range. 

He also stated that quantitative easing will start tomorrow, and that banks will be able to obtain additional funding if they increase lending to business, especially to small and medium-sized businesses.

This lending facility is for up to $90 billion, and more details will be provided in a second statement coming later today. 

"Today's policy package from the Reserve Bank complements the welcome fiscal response from governments in Australia," he said. 

"Together, these measures will support jobs, incomes and businesses through this difficult period and they will also assist the Australian economy in the recovery."

There's already been a flurry of activity in just the few minutes since this announcement. 

Commonwealth Bank CEO Matt Comyn said these are unprecedented times, and call for unprecedented measures. 

Commbank has already:

  • Reduced fixed rate home loans for one, two and three years by up to 70 basis points to a new low of 2.29% p.a. 
  • Launched a new term deposit rate of 1.70% p.a. for terms over 12 months (an increase of 60 basis points)
  • Reduced small business loan rates by up to 100 basis points 

Readers who want to keep track of the latest round of rate cuts to home loans can check out Savings.com.au's emergency rate cut page, and can also look at what each lender cut by for this month's first rate cut

And if you need to stash some cash in a term deposit, the table below displays a snapshot of one-year term deposits with high interest rates. 


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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author-avatar
William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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